The Aussie and Kiwi took small hits across the board thanks to a dovish RBA meeting minutes and not-so-promising Chinese economic reports.
- RBA: no strong case for near-term policy adjustment
- RBA: likely that next move in the cash rate would be up rather than down
- China’s GDP (q/y) retains 6.8% growth in Q1 2018
- China’s fixed asset investment (y/y) slows down from 7.9% to 7.5% in March
- China’s industrial production (y/y) slips from 7.2% to 6.0% vs. 6.4% expected
- China’s retail sales (y/y) up by 10.1% vs. 9.7% expected and previous
- Japan’s industrial production revised down from 4.1% to 0.0% in February
RBA’s meeting minutes
In its statement a few days back, the Reserve Bank of Australia (RBA) kept its policies steady as market players had expected. In fact, the event turned out to be a snoozer because the central bank didn’t really offer anything new at the time.
Well, the meeting minutes didn’t really offer anything new either. While the central bank noted a weaker growth following a decline in exports, it also repeated that the economy will “likely” outperform its 2017 growth.
Indicators also continue to point to spare capacity declining gradually over 2018 and push wages up over the year. However, the low labour costs, combined with strong retail competition, are also expected to keep inflation low “for some time.”
All in all, Governor Lowe and his team believe that their move will likely be a rate hike instead of a cut. However, due to the (slow) pace of “lowering unemployment and having inflation return to the midpoint of the target” also made them believe that there’s “not a strong case for a near-term adjustment in monetary policy.”
China’s data dump
Data from China printed earlier saw its GDP come in at 6.8% from a year earlier in Q1 2018. This is in line with Q4 2017’s 6.8% growth and is better than the 6.7% uptick that analysts had estimated.
Despite the headline beat, analysts are worrying that the government’s efforts in cracking down real estate speculation and environment pollution will drag on growth over the year.
This is why the industrial production slipping from 7.2% to 6.0% was a big deal. Not only that, but fixed asset investment also showed loss of momentum with its 7.5% uptick after clocking in a 7.9% growth in February.
Domestic demand is still resilient, however. Retail sales shot up by 10.1% from a year earlier in March, which is a lot faster than the 9.7% increase seen in the previous month.
The combination of mixed data from China, coupled with trade war risks, didn’t sit well with some investors.
Overall risk appetite
The Asian bourses shrugged off reports of more air strikes in Syria and concentrated on taking a bit of risk across the board.
- Nikkei is up by 0.10% to 21,857.2
- Australia’s A SX 200 is up by 0.37% to 5,850.1
- Hang Seng is flat at 30,316.1
- Shanghai index is down by 0.35% to 3,099.896
Even commodity prices reflected the risk-friendly vibe.
- Gold is down by 0.07% to $1,344.69
- Brent crude oil is up by 0.14% to $71.65
- U.S. WTI is up by 0.27% to $66.49
Major Market Mover(s):
AUD and NZD
Aussie bulls didn’t much appreciate the RBA’s continued concerns over the pace of wage growth and the downside effects of a strong currency on inflation.
AUD/USD is down by 13 pips (-0.17%) to .7765
AUD/JPY is down by 18 pips (-0.22%) to 83.13
EUR/AUD is up by 41 pips (+0.26%) to 1.5945
GBP/AUD is up by 45 pips (+0.25%) to 1.8463
Meanwhile, today’s mixed Chinese data gave Kiwi bulls a chance to unwind some of their long positions.
NZD/USD is down by 16 pips (-0.22%) to .7346
NZD/JPY is down by 21 pips (-0.27%) to 78.64
EUR/NZD is up by 42 pips (+0.25%) to 1.6855
GBP/NZD is up by 47 pips (+0.24%) to 1.9156
Watch Out For:
- 8:30 am GMT: U.K.’s jobs numbers. Read the small preview if you’re planning on trading it!
- 9:00 am GMT: Germany’s ZEW economic sentiment (-0.8 expected, 5.1 previous)
- 9:00 am GMT: Italy’s trade balance (2.23B EUR expected, -0.09B EUR previous)
- 9:00 am GMT: Euro Zone ZEW economic sentiment (7.3 expected, 13.4 previous)